U.S. gross domestic product grew at a 6.5% annual rate in the second quarter of 2021, the Bureau of Economic Analysis announced on Thursday morning.
The growth was significantly slower than what forecasters expected, but better than the 6.3% rate in the first quarter. Economists anticipated a strong pace of expansion thanks to pandemic reopenings and significant spending by the federal government.
With the second-quarter growth, economic output is now greater than it was before the pandemic struck.
Mark Hamrick, senior economic analyst at Bankrate, said that while the second quarter numbers fell short of expectations, “outlook for growth through the end of the year remains upbeat.”
“How evenly the benefits of that growth are distributed remains a key issue, including for those who were disproportionately hurt economically or financially by the pandemic-caused recession,” he added.
Thursday’s figures, which are preliminary and subject to revision, were being closely watched, as they represent the first entire quarter since President Joe Biden was sworn into office.
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While GDP is growing at a fast clip, employment rates in the United States are still being held back from pre-pandemic levels. The economy added 850,000 new jobs in June, eclipsing expectations, but the unemployment rate slightly rose to 5.9% in June, way above last February’s extremely low 3.5% rate.
Inflation has also been on the rise as the economy continues its hot streak. The Department of Labor announced that consumer prices increased 5.4% for the year ending June, the highest rate of inflation since 2008 — numbers that were well above forecasts of 4.9%.
The Federal Reserve has thus far declined to hike interest rates in response to the inflationary pressure. After meeting with central bank officials this week, Chairman Jerome Powell told reporters that the current inflation is “well above” its 2% target, but he remained confident that it would be transitory and sink back down in the coming months.
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“As the reopening continues, bottlenecks, hiring difficulties, and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect,” Powell said. “If we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal, we would be prepared to adjust the stance of policy.”
